Retail apocalypse? Much the opposite, experts say

Economic Forecast: Retail

WILMINGTON – It’s no secret that the prevalence of e-commerce has disrupted the retail industry, helping to kill off longtime brands like Borders, Toys “R” Us, Payless and A.C. Moore in recent years.

But that narrative of the so-called “retail apocalypse” – a term found in more than 45,000 Google News stories online – does not paint the whole picture, according to commercial real estate brokers and analysts.

Construction of new retail, like this plaza in Dover, is continuing. | Photo by Jacob Owens

In fact, Delaware has seen a growth in commercial space construction and in rental rates in every county in the past year, indicators that the demand is strong enough to support the increases.

Joe Latina, a broker at Patterson-Woods Commercial Properties who has worked in the retail space for decades, told Delaware Business Times that most of the closures he is seeing are coming from underperforming national chain brands.

“I’m seeing a lot of the outdated brands that were long-stable in the industry that haven’t been able to adjust to modern ideas,” he said. “Brick-and-mortar stores that are embracing the internet, rather than seeing it as their archnemesis, are thriving rather than shrinking. It’s not a category killer if you know how to use [the internet] to your advantage. For instance, Target is offering a more modern take on retailing.”

With Target recently announcing that it will move into a space vacated by Kmart at the Prices Corner Shopping Center, Latina said that the nearly two dozen other storefronts there will be overjoyed.

“Every tenant in there currently is licking their chops,” he said. “That’s where you want to be: where the people are. And Target will bring them in droves.”

While e-commerce has played a big part in changing the retail market – just look at Amazon, which reported $232 billion in net sales in 2018 – it hasn’t been a death knell for all brick-and-mortar stores. The height of store closings actually passed in 2017, and net store openings have outpaced closings since

According to a study by Deloitte, a global consulting firm, American consumer trips to hospitality, travel, and entertainment destinations rose by 8% in 2018, with trips to convenience, quick service restaurants, and fuel stations jumping 16% and brick-and-mortar retail increasing 2%.

The biggest gains were seen in grocery-related trips, which grew 7.7% in 2018, with a notable decrease in visits to traditional retail locations such as apparel stores (1.7%) and department stores (10.3%).

In Delaware, Latina said that specialty stores are still doing well along with many “big box” stores, such as Walmart, Target, Costco, Home Depot, Lowe’s, and more.

“The old concept of a grocery store, restaurant and dry cleaner in the shopping center is still strong too,” Latina said. “You can’t get your dry cleaning done online, right?”

One of the recognizable trends in Delaware’s retail market is the growth of locally owned restaurants and stores becoming anchors for shopping centers. Brewpubs like Iron Hill Brewery, Two Stones Pub and Crooked Hammock Brewery are expanding and drawing foot traffic with them, Latina said.

“Millennials and Gen Z’ers are very interested in trying something unique, and local breweries fit the bill,” he said. “The local brands have to put out quality, otherwise they’ll fail. National brands have the ability to withstand and sustain.”

National restaurant brands continue to be a strong player, especially in areas that are dependent on tourism like the Delaware beaches, because they have strong marketing presence that make them recognizable to a wide swath of consumers, Latina explained.

“If you’re in a tourist area, you’ll see the national brands carry a lot of power because while you may not know what you would like at the local steakhouse, you do know what you like at Sullivan’s,” he said. “But that may be changing because in today’s world, because with Yelp and other services people have the ability to read a menu or reviews right at their fingertips.” 

By Jacob Owens

DBT Associate Editor

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